Lead vs Opportunity in CRM: what's in a word?

22/03/2017

At Theta we’ve been discussing the difference between a lead and an opportunity recently. We also have customers who use the word prospect as part of their sales cycle and others use the term deal. What does each mean, and what is the difference? Getting this right for your business, understanding how Microsoft CRM views these record types, and connecting the two is an important part of setting up your CRM.

For many companies a lead is potential business with someone they have not done any previous business with. For example a business could purchase a list of auto electricians in the local area and this would be a list of leads. In a typical sales cycle, you would market to the business, and eventually qualify or disqualify the lead. A qualified lead becomes an opportunity, which in turn can be won or lost.

When does a lead become an opportunity?

This is normally based on qualification, generally accepted to be the stage at which there is a chance - whatever the % - of winning the business.

A lead is disqualified when there is no chance of doing business. But if there is a longer term possibility, say 12 months out, should the lead be disqualified? Should a follow up be created or should a long term opportunity be raised?

There are advantages and disadvantages for both scenarios, relating to reporting, and the possibility that long term potential is forgotten, with staff moving on, and/or day to day activities getting in the way.

What about existing customers?

One vexing question: what about potential to sell new products to existing customers? Good old Marketing 101, states “it is easier and less expensive to sell to existing customers than generate new ones.” So if you sell yellow widgets, and introduce a new range of lime widgets, should you be creating leads or opportunities for each of your existing customers?

The moment you split this up you are also more than likely going to be looking at two sets of reporting metrics across your new range.

So the big question, can an existing customer also be a lead??

Microsoft Dynamics 365 for Sales is set up to accommodate this capability, the question is more, does this actually meet your business requirements?

There is no right or wrong way to do this, and in Microsoft Dynamics CRM both options are available. You need to decide on a process and stick to it. If your rule is leads are only ever companies that you never deal with, then during configuration the Existing Customer and Existing Contact fields should be removed from the sales process so that users do not link these to existing customers.

The lead functionality in CRM is very powerful, however, and if you elect to use this, when you create a lead for an existing customer, and then qualify this lead, the opportunity inherits the “originating lead” field and this will allow for deep analysis on campaigns and the leads created.

A newly created customer in CRM when a lead is converted to an opportunity also carries this data of the originating lead and therefore the source campaign. Over time you will be able to view the value of these customers based on the source campaign.

If you don’t set up a lead and start the sales process at opportunity, you potentially lose some of the reporting metrics related to the lead.

The term prospect is also used by many organisations. If this is the case, it is possible to modify the naming conventions in your new system to reflect this, just as one could change customer to client if this is the terminology you use.

Using a nurture marketing approach can also be quite helpful, where long term leads or opportunities are placed on a back-burner and the system will come up with reminders in 8, 12 or whatever planned months’ time.

Over the years I have changed the term opportunity to deal for a few customers, where they felt they were chasing a deal and not an opportunity.

There is no right or wrong, but take a minute, pause for a while and consider what is best for your organisation, and whether, if you change, will this change be easily accepted across the business. If you have been calling something “Prospects and Suspects” for many years and this in inculcated into the corporate culture, then making modifications to your CRM may well be a small price to pay to keep it this way